To Raise Money You Need to Answer Investor Questions
Are you ready for the hard questions from potential investors who are looking to invest in your company?
Investors usually are serious and focused people who won’t hold back when asking questions about you and your company and whether they should make an investment in your company.
You will need to prepare really well for your upcoming investor meetings. Find a mentor. Talk to people who previously have raised money from investors. Learn from them and ask for their tips and insights. You likely will not have a second chance to pitch your company to a potential investor if you strike out during the first meeting.
If you are not ready to answer the following six questions, then you may not be ready to raise money and take your company to the next level. And remember – the potential investors will ask many additional questions, which will depend on their experience, investment focus and style and your preparation and responses to their initial questions.
1. How is your company unique and how will it maintain its competitive advantage?
Investors obviously want to invest in companies that will be successful. What is your secret sauce and unique business plan? Have you really developed a new and innovative technology, product or service? What is your intellectual property protection and strategy? How well do you understand your competition and what makes your company different?
2. Who is on your team and why?
You will need to explain how you and your team will make the company successful (i.e., provide a great ROI for the investor). Do you and your team have the right skills, experience and mindset to build a successful company? Have you done it before?
3. Who is your target market and why do they need what your company is offering?
How well do you understand your target market? What is the need or pain point that your company is solving? How do you know that potential customers will open their wallets and pay for your product or service?
4. What is your business model and how does it work?
It’s all about the business model. You can have the best ideas, technology and people, but your company will not be successful if it does not generate sales and make money.
5. How will you use the investment money and where will it take your company?
Potential investors will want to know how you and your company plan to use their money. Are you asking for the right amount of money? What is the company’s burn rate (i.e., how long will the money last)? If you execute on your business plan with the proposed financing proceeds, then where will you company be and why is that important? Then what?
6. What are the growth and exit possibilities for your company and when will they occur?
Investors will want a return on their investment. And they will want to discuss your plans in order to see if their investment goals are in alignment with your business goals. When do you plan to sell your company?
Make the most of your investor meetings – prepare, practice, rehearse and then do it again before you meet with potential investors.
- Best case – your preparation will lead to serious investor interest and the future funding of your company.
- Worst case – you deliver an excellent investor presentation and engage in a thoughtful discussion with potential investors. This valuable experience and information will increase the opportunities for funding success with the next potential investors.
Which of the above questions provides the greatest challenge for your business and your ability to raise money for your company? Let us know so that you can help other companies start and grow.